Africa Progress Panel to G8: Tax avoidance hurts African economies

The Africa Progress Panel has today urged the G8 leaders meeting at a two-day summit in Lough Erne, Northern Ireland, to make company ownership transparent, exchange tax information and support Africa’s tax collection agencies.

The panel that advocates for equitable and sustainable development in Africa said the measures would significantly help to tackle tax avoidance, evasion, and corruption, with significant benefits for millions of Africans across the continent.

“Natural resources have driven rapid economic growth [in Africa], but few Africans have felt the benefits so far,” a statement released by the panel on June 17 to coincide with the start of the meeting reads in part.

A 2013 Africa Progress Report, “Equity in Extractives” notes that between 2008 and 2010, Africa lost more money through tax avoidance than it received in international aid.

According to the report, anonymous ‘shell’ companies were used in five deals that cost the Democratic Republic of the Congo alone$ 1.36 billion between 2010 and 2012—a sum which is equivalent to almost double the country’s combined budget in 2012 for health and education.

“African countries urgently need to convert the minerals under their ground into tangible benefits for their people, and tax is key to this equation,” said Caroline Kende-Robb, the Executive Director of the Africa Progress Panel.

“When multinational companies use creative accounting to avoid tax, they are literally cheating Africans of their health, their education, their future,” she said.

The Africa Progress Panel wants the G8 leaders to agree on the automatic exchange of tax information between tax authorities around the world, including African nations, and to help build the continent’s tax collection agencies’ ability to collect taxes—a move that the panel hopes will benefit all the countries including those of the G8.

The panel which is led by Kofi Annan, the former UN Secretary General, also wants the G8 countries to establish registries that show who owns every registered company.

“These registries must include tax havens and they must be public and comprehensive, the G8 must finish the job,” Kende-Robb said.

By making company ownership transparent, the G8 removes an important means of hiding illegal or unscrupulous payments, the panel says.

Research by the Tax Justice Network notes that global tax evasion could be costing in excess of $ 3 trillion a year while as much as $32 trillion—a figure twice the size of US GDP is believed to be hidden by individuals in tax havens.

John Christensen, an economist at the Tax Justice Network who has been investigating offshore havens such as the British Virgin Islands and the Cayman Islands for the last35 years says British tax havens were top on the world list helping in hosting ‘shell’ companies and trusts to hide wealth.

Meanwhile, the UK Prime Minister, David Cameron, has pledged to end tax secrecy in the UK.

He said his government will soon force companies to declare who made money out of them and would push for the G8 nations to clamp down on tax avoidance. Cameron said he would appeal to G8 leaders to take steps to prevent tax avoidance by companies.

In an interview with the UK’s Guardian newspaper, Cameron said he would also introduce a new central register requiring that bonafide owners of shadowy ‘shell’ companies be declared to tax authorities.

Experts say the world waits to see how the UK will implement this when it happens to be the main beneficiary and architect of the scam.

The aid charity, Action Aid says the UK controls one fifth of the world’s tax havens and accounts for about one third of the global market in offshore services.

Nicholas Shaxson, the author of ‘Treasure Islands: Tax Havens and the Men Who Stole the World’ told Al Jazeera recently that the UK was the single-most important player in offshore finance.

He described the network as a spider’s web; with London linked in near proximity to the tax havens—Jersey, Guernsey, Isle of Man— all traditional bastions of secrecy and minimal taxation.

He says the British Virgin Islands is home to more than one million registered companies.

According to Shaxson, the UK in its own right can be described as a tax haven since much of the legal architecture that supports financial secrecy is rooted in English Common law, while London financiers were responsible for developing many of the pioneering practices that created the modern offshore industry.